American House, Monarch Form JV to Develop, Acquire Senior Living Along East Coast

American House Senior Living Communities has formed a new joint venture with Monarch Alternative Capital in an effort partly aimed at taking advantage of a recent slowdown in senior living construction.

The JV between the two companies will aim to acquire, develop, and manage senior housing properties across the U.S., with an initial focus along the East Coast. Bloomfield Hills, Michigan-based American House currently has a portfolio of 70 communities.

Monarch and American House’s first venture under the partnership was the recapitalization of six properties partly owned by American House, and the acquisition of another community. The JV’s seven-property portfolio currently totals nearly 1,050 independent living, assisted living and memory care units in Florida, Michigan, and Ohio.

Although Monarch has approximately $9 billion of assets under management, it is a new entrant to the senior housing space. The two companies got acquainted when Monarch partnered with American House’s affiliated development company, Redico — which CEO Dale Watchowski also leads — on the acquisition of a high-rise office building.

“They were a wonderful partner, and they made the decision when they wanted to access the senior space to come in and do so with American House as an operating partner,” Watchowski told Senior Housing News.

The senior housing operator and the investment firm are like-minded in how they view the current senior living landscape, he added.

“Only the best operators will get capitalized, and for that reason, we’re seeing less competition as we go out to either acquire land and develop or acquire properties,” Watchowski said. “The capital allocators who put capital into the business and then look for an operating partner are fewer and far between.”

The latest data from NIC MAP Vision shows that average senior living occupancy is on the rise again after months of pandemic-fueled declines. Those occupancy gains were partly driven by a recent slowdown in new community openings, and the industry is in the midst of a “window of limited inventory growth,” according to NIC Chief Economist Beth Mace.

In surveying the senior living industry, Watchowski believes now is the time for companies like American House to scale up. That belief is underscored by the fact that American House is regaining much of the ground lost during the pandemic, with occupancy rates now back in the mid-80s.

Staffing and labor costs are a big challenge, but the operator has built out its corporate leadership pool with that in mind. Last week, American House announced new vice presidents overseeing wellness strategy and administration, resident care, operations, culinary, accounting and financial planning.

In March, the company named a new chief human resources officer with the goal of boosting recruitment and retention and cutting down on contract labor and overtime amid a historic staffing challenge. Controlling labor costs is also a goal of Brianne Zitko, who ascended to the role of COO in May.

“What we’ve been concentrating on is [using] less … contract labor and agency work and trying to reduce those costs,” Watchowski said. “I would expect it to be a challenge for some time.”

Looking ahead, Watchowski said that Monarch and American House will grow together, first along the East Coast. American House is already heavily invested in the state of Florida and the company has a community in New England. The operator is also exploring more opportunities in the Carolinas.

“What you will see is expansions into those markets — the Southeast and the Northeast — and connecting those markets eventually,” Watchowski said. “Our focus is on markets either with some adjacency or some concentration where we can develop scale.”

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